Ongoing Debate: Does Money Make us Happier?

In the 1970’s, Richard Easterlin, who was an economist at the University of Pennsylvania at the time, published what has become one of the best known studies on the connection between money and happiness. Dubbed The Easterlin Paradox the study determined that economic growth in countries doesn’t necessarily lead to greater satisfaction among the people living there.

Here’s what was written in a New York Times article about The Easterlin Paradox:

People in poor countries, not surprisingly, did become happier once they could afford basic necessities. But beyond that, further gains simply seemed to reset the bar. To put it in today’s terms, owning an iPod doesn’t make you happier, because you then want an iPod Touch. Relative income — how much you make compared with others around you — mattered far more than absolute income, Mr. Easterlin wrote.

The Easterlin Paradox pretty much spawned the idea that money can’t buy happiness.

But that was the 1970s. Plenty of research on the subject has been done since. And, in 2008, two more researchers from the University of Pennsylvania challenged The Easterlin Paradox saying that while money doesn’t guarantee happiness, it tends to bring it. Citing public opinion surveys over 34 years since The Easterlin Paradox was introduced, the study’s authors concluded that income does matter.

Easterlin’s response to this challenge? While he acknowledges people in richer countries are more satisfied, he’s skeptical that their wealth is the reason. Economic growth provides for many things that positively affect our happiness.

So is it the money that makes us happier, or is it what the money creates or enables in our lives that makes us happier?

Perhaps its merely semantics. And my guess is the researchers will continue to study this issue and debate their findings. Ultimately, I believe that happiness is a choice. If we choose to believe we can’t be happy without a lot of money, then guess what, we won’t be happy. If however we choose to be happy where we are, money or not, we can be. Does that mean we’re saying we don’t care about money and we’re never going to try to earn more of it? I don’t think so.

Unfortunately, I think where so many people have gone wrong (and I include myself in this group at least up until recently) is that we’ve bought into all the marketing and other messages telling us that money, material possessions, achievement, and status will make us happier. It’s not that they can’t, but I believe if that’s where you’re looking for happiness, you’re very likely to be disappointed. It goes back to the idea of relative income that was quoted in the New York Times article.

When money and things are your goal, the more you get, the more you tend to want. This is also known as the adaptation principle – perhaps I’ll address that in a future blog post.

My husband and I are currently in a difficult money situation because of my husbands health problems and I can tell you we were much happier when our income was more abundant! Struggling to pay the bills makes it very difficult to be happy. However, I also believe that we can get caught up in always thinking we need more, and never taking the time to enjoy what we have. I believe true happiness will be found when we have a balance of financial abundance with living a life that is true to our deepest values, and learn to enjoy the journey of our lives.

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I think money is described as ‘inverse proportion.’ Where there is more, there is less (happiness). All we actually need is what fuels our basic necessities and certain tools of leisure. We can invest in moderate holidays – such as; camping – where we do not need to spend extravagantly, however, we need to be aware of reality. Being aware of our family, friends and pure joy. Not to be so wealthy, that we ignore everything else.